Wednesday, September 22, 2010

Wednesday, September 22, 2010

The Berkeley Planet reports that since 2003 Gerald Parsky, Richard C. Blum, and Paul Wachter, all financiers themselves have steered UC investments and pensions towards risky private equity and real estate instruments. In order to maintain the appearance of propriety, they got UC to hire private money managers with high fees. Not only were private managers paid handsomely, their investment choices have suffered much more than blue chip stocks and bonds. $2 billion were steered toward risky financial instruments and the losses that UC suffered are negatively impacting its retirement and endowment funds. Blum, once again, reveals himself to be a beneficiary of his regental position: after being appointed to the board in 2002, $745 million of UC money was invested in seven private equity deals involving either Blum or his firm, Blum Capital Partners. People, offense is the best defense. Kudos to Berkeley Planet for excellent investigative reporting. In July, the LA Times ran Mike Hiltzik's column covering UC Regents' conflict of interest news.

Monday, September 20, 2010

Monday, September 20, 2010

In the State of Washington, funding for higher education is in a free-fall. An August 29 story in the Chronicle of Higher Education reports that the State has cut the budget of the University of Washington by 33% or $134m in the past 15 months. But that’s not all, as Governor Gregoire has just signed an executive order for another round of across the board budget cuts --with an open tab—maybe 7% but could be 10%--with the prospect of another $3b state deficit in the next biennium budget (update—looks like 6%).

Here’s how the Chronicle story paints the picture:

“In a frustrating paradox, Washington and other top public universities are victims of their own success. Every research-support milestone or big donation takes a whack at the urgency of their budget appeals. But that money can't be used for faculty raises or for the day-to-day costs of educating students, which can be difficult to explain to the general public.”

This theme has been explored by a number of contributors to this blog over the past year. The more the university claims “success,” the worse off it gets.

Posted by
Chris Newfield

Wednesday, September 15, 2010

Wednesday, September 15, 2010

Introduction by Michael Meranze

With the Regents set to take up the UCRP task force report -- and to consider the Senate's Dissenting Statement as well as a new UCOP Response to the Dissenting Statement --it is more important than ever that the entire university community have the information necessary to debate, and the influence to effect, the future of employee retirement. To that end, Onuttom Narayan, Professor of Physics at UCSC, has examined the logic and calculations of the different proposed solutions to the UCRP funding problems. His analysis appears below, and it concludes that neither of the options that the Task Force proposes (what they term A & B) will, in fact, solve the funding problem. Instead, they will only put off a solution for a decade. By that point, unless UC is able to make dramatically larger contributions from an as yet unknown source, either employee contributions will increase substantially or benefits will be further reduced. What the options will accomplish, however, is to diminish employee retirement in the meantime, and to erode the defined benefit system at the heart of the UC retirement system. Moreover, they will do so in a way that is inequitable—favoring those at the top end of the pay scale. Unfortunately, while the Senate representatives' preferred proposal (Option C) will preserve the present system with small changes, it will not solve the larger funding issues either, and will require employee contributions that are unlikely to be acceptable to all employee groups. Narayan suggests that some immediate changes may help, along with a more searching examination of the way that UCRP is managed, not to mention more equitable solutions to sharing the burdens of change. Please do read his analysis and as always comments are more than welcome.

Posted by
Chris Newfield

Tuesday, September 14, 2010

Tuesday, September 14, 2010

Nothing kills performance like distress. The same goes for fear, anger, powerlessness, injustice, and a sense of having been screwed over by ignoramuses. The remarkable conversation going on via the recent comments on this blog suggest that the Bain-Berkeley analysis for UCB’s Operation Excellence has dug Berkeley into a deeper operational hole than it was already in.

Why is this report so disturbing? Is there anything in it that might make Berkeley administration better? The answer to the second question is yes, but the report rests on several foundational errors. These are serious enough to suggest that implementation of the report as it is will impose an outdated, centralized organizational model that will in turn undermine Berkeley’s key strengths as a university.

This post describes the report’s analysis, and shows that its solutions do not fit with this analysis. I argue that the report will, if implemented, make UCB administration less efficient than it already is. I also offer one simple reason that the recommendations will also make faculty’s relations to staff worse rather than better, meaning that faculty should help staff find alternatives to the Bain-OE blueprint rather than vainly hoping that it will solve some of their local staffing issues.

Bain was paid $3 million, did much no doubt unpleasant digging in financial records, and in probable conceptual deference to its a campus working group partners (8) produced 205 slides on potential savings on the Berkeley campus. The report identifies “five opportunity areas” for savings (15): Procurement, information technology (IT), energy management, student services, and a non-“area” called organizational simplification. They produced some useful data: Berkeley works with over 18,000 separate vendors, mostly lacks the equipment standards that would allow discounts via aggressive negotiations on bulk purchases, has such a diffuse IT system that server farms can be found in more than 50 different buildings, doesn’t actually meter and manage energy consumption across campus, and has spread more than 50 student services across five “control points” (slides 16-20). By improving these functions while also implementing organizational simplification, Bain says that the campus could cut cost in those areas by around 6-10% each (23), thus achieving annual net savings of $70 million by year four of the OE project (24). Some slides offer sensible price negotiation and consolidation strategies (e.g. 39-42). Since UCB’s annual budget is $1.65 billion (2007-08), the savings will not be transformative. But a bit more than 4% annual savings at the end of 4 years seem realistic, useful, and responsible, given UC’s ambitions and obligations as a public institution.

The relatively modest cost savings are coupled with the absence of innovative thinking in this report, and the question arises about why this report had to exist at all. Weren’t these management problems obvious to Berkeley’s own administration? Didn’t anyone in the Vice Chancellor for Administration’s office count vendors and plan some remedies in 2006, when “strategic sourcing” was a management fad in UCOP, or back in 1996, when the vendor count probably hit 10,000? So one naturally wonders what is it about UCB’s administration that required it to pay Bain $3 million to tell it how to do some fairly humble portions of its job.

Clues appear in two of Bain’s slides, and bring us back to the fifth opportunity area, the organization itself. First, Berkeley is not a “flat” or networked organization, but an old-school military pyramid with 11 separate layers of management (56). It is at the same time a fragmented pyramid (62) in which communication is less than ideal. The combination no doubt makes Berkeley administration at times the worst of both worlds: inefficient and yet top-down authority, which stifles creativity in the middle and lower layers without offering clear mobilization orders based on some greater vision of the whole. In addition, supervisors have fairly few direct reports, or “narrow spans” (55-57).

So far, the data would suggest to most readers that Berkeley’s problem is that it is too hierarchical, has a heavy bureaucratic burden, partitions or actively hides information to the detriment of efficiency, and intimidates or inhibits lower-level staff rather than informing and empowering them. This would explain why the VC for Administration might now know just how fragmented procurement had become, and why local units would try to operate as much as possible on their own. In other words, Berkeley has too many supervisors and they do too much supervising, which makes supervising less efficient. Too much staff effort is spent negotiating authority and ensuring compliance and too little in practical problem-solving, process innovation, open communication, and direct service to faculty and student “customers.” Both efficiency and innovation depend on informal knowledge, constant information exchange, easy collaboration, and high levels of interest and trust. Berkeley’s stratification and opacity inhibits all of these.

The second clue is confirmation of the effects of UCB’s elaborate hierarchy on organizational morale. Bain’s survey found that Berkeley has a very low “net promoter score” (114), meaning that a majority of employees would not recommend Berkeley as a place for a friend or relative to work. Employees also take a dim view of the organization’s mode of decision-making because it is insufficiently “participatory” (115-16).

Putting these pieces together, we might assume, would mean two remedies. 1) Delayer management, specifically, the middle and upper-middle layers that supervise supervisors rather than offering direct support to teaching and research. 2) Rebuild morale by moving to greater participation by all employees in key decisions. (116). Bain and the OE working groups would then define “organizational simplification” as moving towards a relative flat organization where a smaller number of supervisors and senior executives redefine their role as coordinating participatory decision-making taking place across a decentralized “learning organization.” Efficiency would be sought through informational transparency rather than through bureaucratic authority. Knowledge and trust would increase, self-protection and suspicion would decrease, zero-sum selfishness would decline, and units would be more likely to accept and adapt to painful changes because the participatory process allowed them to understand and to influence the process, even if the outcome was not what they wanted.

This interpretation would move Berkeley towards a flatter and genuinely participatory management structure. But it requires a non-corporate understanding of the university as a necessarily distributed innovation system. The university’s core missions – instruction and research – do in fact occur in frontline units rather than in central administrative offices. Its mission intelligence, in other words, is bottom-up, not top down. The university’s overall output occurs through parallel processing, in which units work on specific activities – only partially shared with others – in relative autonomy. The core activities range from computer engineering to studio art and cannot be standardized, nor can their administrative support be standardized. Efficiency is compatible with – indeed, depends on -- unit autonomy, which enables units to deliver services in the way that is most effective for their particular “customers” (first-generation students, or IT needs in physics as opposed to economics). Unit activities and “outputs” are also therefore modular. The university’s decentralization is an expression of the way its work actually gets done – and must get done. Though logistical and administrative support can certainly be improved, it cannot be improved by violating the bottom-up, semi-autonomous, modular, and decentralized architecture that has been developed over decades to support academic work as it actually takes place. A university is more like an open source software development community than it is like a production line.

Unfortunately, the OE report’s solutions get this upside-down. They rest on two “critical enablers” – a “higher performance operating culture” and a “financial management model” (21).

At first these look like no-brainer clichés, but in fact they form a belief system that the report does not derive from its campus analysis but that it imports as pre-conceived ideas about modern organizations. If you look at column A on slide 21, you will see that “high-performance operating culture” means linear communication and harder decision paths coupled with more measurement of employee output. Column B puts unit finances more directly in charge of those who speak for “pan-university priorities.” Both “enablers” seek increased control of units and employees. They envision the use of financial audits (and merit pay) to ensure compliance. These two empirically unsupported axioms about efficiency are what have provoked the staff concerns we’ve been seeing on this blog. They are structured to default to top-down power, and to operationalize the authority of higher-ranking units over frontliners. The report’s “enablers” convert Berkeley administration to what British scholars of higher education call “audit culture,” which predictable increases in administrative costs due to escalations in assessment and control.

It follows logically that the report solves the procurement problem with centralization. The future is described in slogans like the following. “Vendor relationships: Central procurement owns all vendor relationships” (47). In this model, financial savings will come only when central procurement reduces unit autonomy and choice. One could imagine the relief of dozens of units in giving up vendor relations to a central office if and only if the units knew that the central office saw itself as a support function that would honor unit views about their own (distinct and only partially standardizable) needs. Art history may require graphics cards or processors that are not part of the standardized package. But centralized, functionally uniform service centers not only lack the kind of local knowledge that makes the unit’s activities efficient, but will define the overriding of local knowledge as part of their job.

The same move toward reinforcing UC’s existing top-down, hierarchical structure appears throughout the organizational simplification section, which is worth reading carefully (52-71). The report mixes “increasing supervisory spans” with “improving front-line productivity” (54) – meaning it mingles together cutting supervisors with cutting front-line employees. The data showing that more than half of all supervisors (1000+ people) have 3 or fewer reports (58) supports the interpretation that Berkeley staff suffer from too many supervisors. The “illustrative example” shows a laborious reshuffling of units with the net result that 22 employees are reduced to 21 (68). Since OE is looking to cut Berkeley’s $700 M in staff payroll by 6-8% (23) the actual layoff rate would be double this. In addition, the report’s stress on centralization will push losses to the periphery and the bottom rather than letting them occur in the upper-middle, where the salary and efficiency savings would be greater.

Faculty members should also pay close attention, because their activities will not be helped by the report’s definition of optimization as conforming local units to “pan-university” goals (6, 132). Faculty dissatisfaction with staff can be traced to the fact that staff members already do not work for faculty or for their local unit but for the pan-university. Your department’s bookkeeper may help you to squeeze the last extra value out of your limited grant money, but this is in fact not his job. His job is to provide the university’s budget office with accurate financial information, to enforce university regulations, and to protect the university from audit problems. The same is true for the IT specialist, who is already charged with minimizing costs and maximizing standardization, cross-university connectivity and interoperability. She is not charged with optimizing your office’s or your lab’s particular system. Staff are already there to fuel the university’s administrative metabolism, to the frustration of faculty and also of most staff.

Bain’s plan is to make IT people report directly to central and senior IT people rather than to your department chair and/or her IT colleagues in related units. In other words, local, horizontal, cross-functional relationships will be gutted, and replaced by vertical single-function reports. Those who think this siloing and verticalization will increase efficiency are about thirty years behind in their reading of the management literature, which abounds with tales of the effectiveness of cross-functional teams and horizontal collaborations based on local needs. Similarly, Bain-OE promulgates the dumb idea that “generalist” supervisors are a problem (52, 76), although in fact they are the indispensible coordinators in any distributed, necessarily non-standardized innovation system. The first victims of this OE regression towards something that looks even more like a 1950s multidivisional corporation will be staff, and the second victims will be the faculty members who have built up local staff collaborations over time on which, in reality, their productivity depends. But the goal is not to enhance faculty productivity, but to optimize the pan-university. The big losers will be individual academic departments – their staff and faculty alike. Staff will be pulled away from frontline operational reports and into the authority field of the central office controlling their specific function.

The slide that best summarizes OE’s regressive solutions is 117.

The image is the bureaucratic version of the alien ship in Independence Day, a looming, inverted pyramid in which top dwarfs bottom and threatens to swallow it whole. Everything flows top-down, and the administrative content takes the form of goals-metrics-evaluation which are communicated to units (metrics –assessment of performance), on down to supervisors (accountability functions) and then finally to individuals (performance metrics tied to unit goals.) Relationships are reduced to the abstract modalities of compliance embodied in assessment procedures. Management is not support for the university’s necessarily diverse creative functions but is a state of permanent evaluation. There is no respect here for the autonomy of the units – departmental staff, student services, and technical staff for laboratories – that are close to the “customer” (cf. “autonomous culture” as a source of inefficiency in procurement, slide 35). The tone is of control through communication, through finance, through even more of the endless audit and evaluations to which UC employees are already subject. The implicit diagnosis is that Berkeley’s employees are inefficient because they are insufficiently assessed, measured, and financially incentivized. The diagnosis is anti-humanist, at odds with current literature about both human motivation (intrinsic) and effective organizational behavior (collaboratively organized). It is also ungrounded in evidence from the Berkeley campus. The predictable effect, as I noted at the start, is that the model contained in the report is already making staff efficiency worse.

I don’t have first-hand knowledge of how the Berkeley campus process is unfolding this week or this month, but the public documents are not promising. There is the OE czar, central process managers, hand-picked committees making implementation decisions in smoke-free rooms, and roving HR bands hired from the outside. There is nothing there about collaborative implementation, protections for productive autonomy, bottom-up integration, non-intrusive coordination of the decentralization on which organizational creativity depends.

I see three things that would help:
A freeze on threats of staff layoffs tied to the OE process.
Stated commitment to viewing the distributed nature of the university as a strength, and to seeing management as a coordinative support function.
Full participatory involvement in implementation, starting with rank-and-file faculty and front-line staff.

Only a bottom-up process will keep Bain-OE’s new centralized units and new administrators (more HR consultants, more “experienced sourcing staff” (49) from bogging Berkeley down even further. Industry also used to know this, and research managers from Kodak’s legendary Kenneth Mees in the 1920s to the “skunkworks” at Lockheed during World War II to Bell Labs in its heyday to the Internet (all top-down managed “intranets” were commercial failures) to Apache and similar open source software projects– all managed innovation through mutual respect, good communication and the participatory negotiation of policy and resources. The best way to wreck innovation in organizations is to micromanage the local units. Unless they want to spend even more time and money encouraging UC’s decline, the OE groups need to turn the OE blueprint on its head.

Posted by
Chris Newfield

Wednesday, September 8, 2010

Wednesday, September 8, 2010

As the many comments by staff members to the post Did I miss Something? make clear, the task force on pensions and UCOF are only one strand of the ongoing restructuring of UC. In multiple departments and offices, especially at Berkeley, staff jobs are being eliminated and downsized while faculty are away, and the attempt to cut costs on the basic organization and staffing of the campuses are taking their toll on members of staff and their ability to perform their jobs. While Bain, to take only one example, is taking home its profit for swooping in and deciding which human workers are necessary and which are disposable, the people who actually support faculty offering instruction and performing research are facing both overwork and a loss of job security.

Unfortunately, this information tends to be localized. Do people have data on job losses, or information on staff restructuring and consolidation etc? The more that people know the better.

Posted by
Michael Meranze

Saturday, September 4, 2010

Saturday, September 4, 2010

In the latest issue of the Senate Source Henry Powell makes explicit what many of us already suspected--that while the UCOF process is ongoing, President Yudof has told the working groups that their participation will no longer be needed. Admittedly, this announcement is no great surprise. But it does raise at least one question. At the first round of recommendations in March (back when we still pretended that the process was being driven by the labor of the working groups) the Working Group on Education and Curriculum noted that they had put off any firm recommendations about educational quality but indicated that these recommendations would be forthcoming. (49) Now that promised discussion has been short-circuited. (Although as Anonymous points out below in comments that short-circuit is not the fault of the working-group which did deliver a fuller discussion.)